Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast news in brief, where, as always, we're going to be recapping the main events from last week's supply chain news and giving you an insight on what you might see on the Lodestar this week. Now, at the beginning of last week, we learned that the European Commission had given the green light to MSC to continue with its deal to purchase a stake in Hhla. And gav, you were in Hamburg last week at the World Ports conference and you learnt all about this. So could you tell us some more, please?
[00:00:34] Speaker B: So the European Commission competition regulators have. I mean, it was never really in doubt, but they've given a green light for MSC to buy a 49.9% stake in HhLA, which henceforth we're going to call by its german name, Halle. Okay? And so whether it was a matter of design or nothing, I'm not entirely sure, but MSc chief executive Soren Toft was giving the keynote speech at the World Ports conference. Mister Toft. He used the speech for two things, really. The first of which was, I think, was very much directed at the Hamburg port, at Haller employees, and actually to the wider citizenry of the city, because it's extraordinary how many people were talking about it. You know, everyone is an expert in MSc and Hala now in the whole city. It's quite the thing. Mister Toft sort of basically used his speech as a way to sort of reaffirm publicly the commitments that MSc has made to Hala and to the city of Hamburg in acquiring this stake. You know, it's going to invest €450 million into the terminal operator, which, by the way, I discovered it quite urgently needs. And it's going to move its waters there, creating between 751,000 jobs and it's going to put 1 million tu across its keys in however many years it's scheduled to do so. So that was the sort of interesting part to that. Now, at the same time, we were given quite an extensive tour of Hala's facilities in Hamburg, and one of the chief things it's been doing has been where the project's been going on for twelve years, it's been doing this automation project, converting its main terminal from one that employs about a thousand drivers effectively, and turning that into an automated process. Now, those drivers have all been given work elsewhere in the new arrangements and in other things, but it was just very interesting to see this automation in action and underway in the very week that the ILA and the port employers on the US east and Gulf coasts had concluded their first round of talks, agreed a wage increase, but said, you know, the real thing we still have to hammer out is what's happening with automation.
[00:03:02] Speaker A: Something else that I found really interesting from your reports last week at the conference was how Sorentoft views MSC services and why they've chosen to go it alone and not join another alliance when the two m alliance breaks up in February. So what did he say about this?
[00:03:20] Speaker B: So he said, you know, they're going it alone because they've got a massive fleet and they can go alone. And when you've got these things on your own, you don't have partners that you need to confer. When you're making operation decisions, it's much easier to make those decisions. Right. And the global supply chains have been under all sorts of shocks over the last few years that we all know about. And he said there are more to come. He didn't know what they're going to be, just that they're likely to come. So going it alone allows MSC, they believe, to have more flexibility when it comes to dealing with the problems. The second aspect of this is their strategy of providing as many direct port pairings as possible. So he went through the numbers and basically claiming that if you looked at Asia Europe services, they call it more ports in Asia and they call it more ports in Europe than any of the other shipping groups. And I think partly it's interesting to see, because you're in Hamburg, let's not forget that that's the headquarters of Hapag Lloyd and the forthcoming Gemini agreement, which Maersk and Hapag Lloyd will start operating on the same day that MSC goes. It alone is 180 degrees opposite strategy. It's a strategy of going to selected transshipment hubs and then serving other ports via shuttles. We will find out, yeah, it's gonna.
[00:04:42] Speaker A: Be interesting, come 1 February to see which shippers do actually prefer. But speaking of Gemini, they announced the decision last week to plan their network around the Cape of good hope rather than through the Suez Canal. And this is four months before this service even starts. And I spoke to Carster Cadal, who is Maersk's CCO, and he said that this was done to give customers enough time to plan their networks. But it does also indicate that both Maersk and Hapag Lloyd do not see any near end to the Red Sea crisis.
[00:05:12] Speaker B: I mean, who does?
[00:05:13] Speaker A: Exactly.
[00:05:13] Speaker B: You know, it's. While this sort of conflict goes on there, there is no prospect of, I mean, people still are going through the Suez Canal but just not these deep sea carriers.
[00:05:24] Speaker A: Well, I mean, Maersk, they did say that this won't change their 90% schedule reliability aims.
[00:05:29] Speaker B: Yeah, I mean, I believe that. I mean, we've talked about on previous podcasts this thing that if you go around the Cape of Good Hope, as long as you, your speeds are regular, your port calls are right, all it means is an extra two weeks sailing time. So as long as you plan in.
[00:05:42] Speaker A: Advance for that, well that is until the canal reopens because Mister Cadal did say that there will be an operational meltdown when that time does come. So one to look out for. And finally, gav, we need to talk about the ocean shipping rates from last week. So what happened?
[00:05:58] Speaker B: There's not a great deal to talk about, though. Anything out of Asia has been down 3% to the US east coast, down 5% to the US west coast, down 6% to northern Europe, down 2% to the middle. We're entering the slack season. The main shipping peak season is over. And what normally happened, what we have seen now is that if you look at Drury's blank sailings, tracker showed that the number of blank sailings are going up. So carriers are starting to cancel selected fourth quarter sailings because of lack of demand. And also what they're saying is that they want to avoid vessels being caught up in the east coast congestion. So just to reference that, Drury reckons that about 10% of capacity out of the five east west trades will be taken out between now and mid November. So shippers can start to expect to see less choice really on services, but it's a slack season, so it's unlikely to have a sort of industry wide effect.
[00:07:00] Speaker A: Now onto air freight. Alex, you reported that Kenya was losing capacity to profitable and in demand trans Pacific routes and you spoke to, to some carriers and a shipper about this. So what did they say?
[00:07:12] Speaker C: Yeah, well, the kenyan flower sector is pretty upset. They are saying the capacity has been sort of shifted over towards e commerce and people aren't going to Kenya enough and as a result rates have gone up and they can't really afford what little capacity there is. Although, yeah, both of us spoke to carriers. Lufthansa and Qatar Network Aviation Services said that they hadn't reduced capacity. They may have shifted a little. Magma aviation had and said, yeah, it was doing a bit more e commerce and it moved one flight out of Kenya. But I think really what this speaks to is that the airlines are being very flexible at the moment. They were coming into, well, we've just started Q four rates as of last week were at the highest level this year, and they're looking to, to profit as much as they possibly can. So we looked last week at a story on Vietnam where capacity has gone up 360% in the last week, year on year, and everybody seems to be putting freighters in there as quickly as they can. So I think what's going to happen is there's just going to be little pockets. So out of Kenya into Vietnam, and then when the flower market actually starts taking off, no doubt they will go back in there. So they're doing what they normally do, which is being as flexible as they possibly can.
[00:08:31] Speaker B: That capacity in and out of Vietnam, is that normal? Is that for e commerce traffic or is that for, like, normal exports coming out of it? It's so called normal exports.
[00:08:41] Speaker C: It's very hard to tell. And airlines generally don't even know if they've got e commerce or not. But I imagine it's probably a mixture of both those things. I mean, you know, China plus one, Vietnam has been a strong benefit beneficiary, beneficiary of the China plus one strategy. So it could well be that and it could well be other geopolitical machinations that I can't figure out. And so I think we'll just keep seeing that. And e commerce obviously is going to come into the fore over the next two, three months. And I think the fact that the rates just hit their new peak is probably the start of peak season rates coming on stream.
[00:09:18] Speaker A: At the end of last week, we saw Hurricane Milton, which was a category four hurricane, make landfall in Florida. What impact did this have on supply chains?
[00:09:28] Speaker C: Well, happily, it wasn't as bad as predicted. I think when it hit, it was actually went down to category three. Obviously were devastating for the people affected by it, but it mostly affected western Florida, which isn't so much of a supply chain. And a logistics port of Tampa isn't there. Port of Tampa. So Jacksonville was closed for a couple of days. I think Miami airport stayed open. There was a few cancellations and bits and pieces, but generally speaking, the logistics following that seems to have been smoother than was expected. And we ran a story last week about how forwarders were more concerned about the hurricanes than they were about the fallout from the strike. But actually it looks like things seem quite smooth given the massive impact of it. Anyway.
[00:10:25] Speaker A: So now you are all up to date with last week's supply chain news. Here's what you might see on the Lodestar this week. Well, last week we reported that the Port of Montreal Longshoremen's union went on an overtime strike at 07:00 a.m. on Thursday and they said this would last indefinitely. The Port of Montreal said that it was concerned about the anticipated supply chain impacts, and according to its estimates, the current overtime strike may slow down or disrupt the handling of around 50% of goods transiting through the port, and that is both imports and exports. So this week we might start to see the impacts of that materialize, but I would expect this to be quite localized and fairly easily mitigated. I mean, this is minor compared to what we have seen over the last year. However, tensions are rising and any escalation to negotiations or even a full on strike would have greater impacts. So definitely one to keep an eye on. Gavin van Mahal is on a trip again this week, but this time slightly closer to home, although still across the North Sea because he is going to Zenitas Ocean and Air Freight Summit in Amsterdam and this event is specifically designed for shippers, freight forwarders and carriers looking to expand their operations, modernize and get ahead of global disruptions. Now, unfortunately, I'm off periodically over the next two weeks, which means that there will be no news in brief until Monday the 4 November. I'm so sorry to be leaving you for so long, but not to worry because you can always stay informed by following our daily breaking news on theloadstar.com or on our LinkedIn page. And I should just quickly mention that I am attending the aviation connect event in Istanbul on the 29th to the 31 October, so please do get in touch if you would like to have a chat with me there. I'm really looking forward to it. Thank you so much for joining me and have a good weekend.
